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SWA - Positive signs for Scotch Whisky exports :: Return to growth on horizon :: 5th November, 2015

SWA - Over £1 billion boost from duty reform for Government - 1st September, 2010There is now clear evidence that the recent decline in Scotch Whisky is slowing, with industry exports in the first half of the year totalling £1.7 billion.

Encouraging trends are starting to develop in several key markets despite continuing economic headwinds, political uncertainty in some parts of the world, and the impact of a stronger pound sterling in many areas.

Looking ahead, there are signs of improvement, with the 3% decline in the value of Scotch Whisky exports in first six months of 2015 being smaller than the fall of 11% between the first half of 2013 and 2014. Premium blends and Single Malt Scotch Whisky continue to become ever more popular. Single Malt exports were up 5% to £406m in the first half of this year.

Overall, the volume of exports was down by half of last year’s decline, falling just under 3% to the equivalent of 517 million bottles.

In North America, exports to the USA, the biggest market by value for Scotch Whisky, remained steady at £327m. Single Malts and premium blends are doing particularly well as consumers seek out quality. In Canada, the same trends drove an increase of 20% to £36m.

In the other North American Free Trade Agreement (NAFTA) market, Mexico, exports were also up by almost 12% to £43m. This makes it a top ten market for Scotch, which is becoming increasingly popular among younger, fashionable consumers. The value of Single Malt exports soared by more than 70% to £3.6m. If a refreshed European Union-Mexico Free Trade Agreement (FTA) can be agreed, the prospects for growth will be even stronger.

Despite the well-documented austerity measures in China, the market returned to growth with direct exports jumping 46% to £22m in the first half of the year. This principally reflects the strong efforts made to export bottled Blended Scotch, up 42%.
Exports to Japan are up 7.2% to £35m. After many years of decline, it is exciting to see the market grow again on the back of renewed interest in whisky. The increased interest in heritage among whisky consumers is benefiting Scotch.

In other markets the trading environment is more volatile. In Europe, France and Spain were up in volume but down in value. Germany was down in both value and volume, but some of this is likely to reflect a fall in re-exports to Russia. Brighter spots were Poland, up 45% in value to £20m, Turkey, up 28% to £23m, and Italy, up marginally after years of decline.

Outside Europe, the Brazilian market was badly hit, down nearly 30% in value because of the severe economic downturn and consequent weakening of the Real by a third since the start of the year. Sanctions and economic developments in Russia have knocked it out of the top 20 markets altogether.

Finally, exports to India fell 11% by value and 8% by volume, reflecting ongoing difficulties in the business climate, though India remains the fourth biggest market by volume. A resumption and conclusion of the Free Trade Agreement negotiations is needed if sustained export growth is to take place in India.

David Frost, Scotch Whisky Association chief executive, said: “We’re starting to see some strong signals for growth and we continue to believe the long-term prospects for Scotch Whisky remain good. This is reflected in the large number of new distilleries opening, with half a dozen starting production in the last year or so.
“The growth of Single Malt exports shows that premium products are ever more popular. We had a decade of record growth, there was then a decline in exports in recent years largely because of the slowdown in the emerging markets, but signs of improvement are on the horizon.

“We will continue to push for more open access to markets by pressing for the removal of barriers such as high tariffs and unfair levels of taxation. Scotch needs a level playing field, in the UK and overseas, to continue to be a Scottish and British success story.”

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